Last year, the government had set aside Rs 4.71 lakh crore for the defence sector, with capital outlay — required for miliary modernisation — witnessing just a marginal increase.
This year, however, the defence sector is eyeing a generous capital infusion amid a heightened need to strengthen the military infrastructure in view of the ongoing border conflict with China.
With just two days left for finance minister Nirmala Sitharaman’s budget presentation on February 1, we look at how the government has been spending on defence over the years …
Defence spending in the last decade
Last year, the government’s allocation to the defence ministry was the highest among all ministries at 15.5% of the total budget expenditure.
India’s overall defence spending has witnessed an average growth rate of 9% in the last 10 years.
If the government sticks to this trend, at the very least the defence budget this year would likely exceed the Rs 5 lakh crore-figure.
However, in terms of military reforms and modernisation, all eyes will be on the funds allocated for capital expenditure.
Army biggest stakeholder
The Indian Army, with its overwhelming size, continues to be the biggest stakeholder in the defence budget among the three forces.
In last year’s budget, almost 56% of the total defence outlay was earmarked for the Indian Army. The Air Force and Navy were allocated 23% and 15% respectively.
But the interesting thing here is that the Army’s capital share was the lowest among the three forces.
Out of the total amount allocated for the Army, only 18% constituted capital expenditure while the rest was meant for revenue expenditure
Revenue expenditure includes expenses on payment of salaries and maintenance of establishments while the capital expenditure involves the purchase of new weapons, platforms and military hardware.
According to Institute for Defence Studies and Analyses (IDSA), the Army’s capital share has been on a constant decline over the last few years since the high of 26% in 2007-08.
Meanwhile, the Air Force’s capital share was the highest at 59% on the back of the government inking big-ticket deals to bolster India’s air power.
Defence as proportion of GDP
Despite a nominal year-on-year growth rate, the defence budget appears to be somewhat underwhelming when viewed as a proportion of India’s Gross Domestic Product (GDP).
According to last year’s figures, the overall defence budget was just 2.1% of the then estimated GDP. This was the lowest figure since the early 1960s.
In fact, over the last few years, India’s defence budget as a proportion of its GDP has been on a decline.
Military experts believe that India should allocate at least 2.5% of its GDP to defence expenditure for building requisite deterrence against China and Pakistan.
Slow pace of modernisation
The modernisation of India’s 1.5 million strong armed forces has witnessed slow progress in the last few years due to ballooning salary and pension bills.
In 2010, salaries and pension took up nearly half the total defence budget at 49%. This increased by 10 percentage points to 59% in 2019.
According to IDSA, the rising manpower cost has posed a hindrance to the much-needed modernisation of military.
In last year’s budget, the capital outlay for new weapon systems and defence modernisation was Rs 1,18,555 crore, much lower than the Rs 2,18,998 crore revenue expenditure for day-to-day running costs, salaries and the like.
NDA vs UPA
As a proportion of the total budget expenditure, India’s defence spending was the highest in 2000-01 under the then Atal Bihari Vajpayee government at 16.73%.
The Manmohan Singh-led UPA government began its term by setting aside a handsome chunk for the armed forces in its first couple of years. But the proportionate spending fell to an average of 13% in its later years.
Similarly, the Narendra Modi government set aside an average of 12% of the total budget for defence in its initial years. However, the proportion fell to 11.62% in 2018 and then further to 10.96% in 2019, the lowest in the last two decades.
Last year, the spending picked up again when the defence ministry was allocated the highest sum among all the other sectors at 15.5% of the total budget expenditure.
India vs world
With a steady increase in its defence allocation, India became the third-largest military spender in the world for the very first time in 2019.
According to data released by global think-tank Stockholm International Peace Research Institute (SIPRI), India surpassed Russia with a military expenditure of $91.1 billion in 2019.
However, it still lagged way behind US and China – the top two military spenders. The US spends more than 10 times and China almost four times India’s defence budget.
SIPRI had said that China’s military expenditure reached $261 billion in 2019, a 5.1% increase compared with 2018, while India’s grew by 6.8% to $71.1 billion.
“India’s tensions and rivalry with both Pakistan and China are among the major drivers for its increased military spending,” the report had said.